Dr. Clinton Herzog of Texas embezzled $2.1M from investors

A dentist who can no longer practice in Texas (TX) following disciplinary actions was sentenced for reportedly defrauding his dental practice investors out of hundreds of thousands of dollars that he used to pay for travel, jewelry, and more, according to the U.S. Department of Justice.

Cases of dental office embezzlement are, at their core, a breach of trust and a form of employee theft that can go undetected for years.

Dr. Clinton Herzog, who was convicted of wire fraud, was sentenced to 36 months in prison and ordered to pay more than $2.1 million in restitution, according to a press release dated January 29 from the U.S. Attorney’s Office for the Western District of Texas.

The 49-year-old Pearland dentist promised, among other things, that the relevant LLCs would not combine investor funds with the assets of any other person. Herzog violated these agreements by co-mingling his own money with investment funds. He reportedly redirected investor money so he could spend it for personal expenses, including expensive meals, airline tickets and travel expenses, jewelry, and alcohol, according to the release.

Following a string of disciplinary actions, Herzog voluntarily surrendered his dental license in 2016.

Since 2011, the Texas State Board of Dental Examiners had fined Herzog and placed him on probation. He was fined $3,000 for placing faulty prosthetics and giving wrinkle-reducing injections in exchange for patient referrals. Herzog was later fined $9,000 for multiple treatment failures, including failing to monitor a sedated patient and leaving a piece of a broken instrument inside the socket of a patient’s extracted tooth, according to orders from the dental board.

In 2017, local lawmakers introduced SB 404. The bill, which ultimately was not signed into law, called for a prohibition on healthcare practitioners, including dentists, from serving alcohol to patients and their guardians or guests. The bill also proposed imposing an administrative penalty for failure to comply. 

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Related reading: Electronic Funds Transfers – 7 Reasons they are Dangerous

Background: License Surrender and the FLOSS Dental Collapse

Long before his federal wire fraud conviction, Herzog’s conduct had drawn scrutiny in Austin. An August 2018 KXAN investigation reported that a lawsuit filed in Travis County accused Herzog of collecting hundreds of thousands of dollars from investors to open FLOSS Dental locations in Austin — and that he was not, at that point, a licensed dentist. The Texas State Board of Dental Examiners had suspended his license in 2015, permitting him to practice only under certain conditions, and in 2016 Herzog voluntarily surrendered his license — a fact the plaintiff investors said they were never told.

Board records cited by KXAN also showed Herzog had been accused of deceptive advertising: promoting his offices as having multiple “elite” Invisalign providers when he was the only one, and advertising free or discounted dental services without disclosing the prices of associated services.

Herzog founded FLOSS Dental in Dallas in 2007 and in 2015 raised money to open five Austin locations — on 5th Street, 38th Street, South Lamar, Brodie, and The Domain — forming a separate company for each. According to the lawsuit, the Brodie location was “a complete sham”: Herzog took more than $500,000 from investors but never completed the purchase of the existing practice, instead attempting to operate it through the landlord. The South Lamar location opened in December 2017 and closed within months; its investors reportedly never saw any return. When Herzog attempted to sell that location for $20,000 in August 2018, a judge granted a temporary restraining order blocking the sale.

The Travis County suit alleged breach of contract, multiple types of fraud, negligent misrepresentation, theft, breach of fiduciary duty, and conversion, claiming Herzog withdrew large sums from FLOSS to support what plaintiffs described as a recklessly expensive lifestyle. Staff at his Fifth Street office told KXAN he had simply left town. These civil allegations foreshadowed the federal prosecution that ultimately ended with his 36-month prison sentence and $2.1 million restitution order.

Source: KXAN: FLOSS Dental owner had questionable dental past before closures